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Should I buy FTSE 100 shares Lloyds, Tesco, or Glaxo in July?

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Scene depicting the City of London, home of the FTSE 100
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I’m hunting for top FTSE 100 shares to buy this July. Which of these British blue chip stocks should I pick up?

Tesco’s travails

The Tesco (LSE: TSCO) share price got off to a flyer in June before falling sharply following the release of fresh financials. I’m not taking the opportunity to buy in on the dip though given the increasingly competitive pressures it faces.

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The FTSE 100 firm still sits at the top of the UK grocery market. But its crown has lost much of its lustre thanks to the growth of the low-cost and premium supermarkets. And the chances of Tesco returning to steamroll the competition are dwindling as its competitors expand their operations on the high street and on the Internet. Discounter Lidl remains on course to open 140 stores in Britain by 2023, it said this week.

Okay, Tesco still has plenty of clout and it is investing heavily to improve its operations in the fast-growing online channel. However, I still worry that the company will struggle to generate decent profits growth as worsening competition shreds its margins.

Lloyds under pressure

I’m also not surprised that the Lloyds Banking Group (LSE: LLOY) share price has struggled in June. It’s just the threat posed by a spike in Covid-19 cases and the repercussions for the domestic economy. Arguably the possibility of rock-bottom interest rates lasting long into the future creates an even bigger risk to the FTSE 100 bank’s profits.

The Bank of England this week raised its inflation forecast to 3% from 2.5% previously. This is even further ahead of the institution’s 2% target. But policymakers said that they are determined to keep interest rates locked around current lows of 0.1%, describing the recent surge in prices as “transitory.”

This creates problems for Lloyds as it narrows the difference banks can charge people to borrow and what it can give savers. And I don’t expect interest rates to rise considerably any time soon as the UK economy battles economic hangovers from Covid-19 and Brexit. It’s true that the robust housing market could drive profits higher at the bank (Lloyds is by far Britain’s biggest mortgage lender). But I still think the risks of buying Lloyds shares far outweigh the potential rewards.

I’d rather buy this FTSE 100 share

While I’ll be giving Tesco and Lloyds a miss this July, I’m looking at buying GlaxoSmithKline (LSE: GSK) for my shares portfolio. This UK healthcare share has performed better price-wise than those other FTSE 100 stocks so far this month. But this momentum moving into the summer isn’t the reason I’d buy it today.

I always buy stocks according to what returns I can expect to make over the long term (ideally a decade or more). And I think Glaxo will thrive as global healthcare investment goes from strength to strength. The firm has a packed drugs pipeline in key therapy areas like infectious diseases, HIV, and oncology. What’s more, the business has described many of its 20 vaccines and 42 medicines as “potential best or first in class opportunities.”

The business of drugs development can be highly unpredictable. And setbacks can have huge financial implications for pharma companies like this. That said, Glaxo has a great track record on this front and so I’d happily buy it in July.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline, Lloyds Banking Group, and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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